Saving

Retirement Nest Egg Calculator

Do you know how much money you will need per year in retirement? Do you know how that number will be affected by inflation? I would encourage you to check out our Retirement Nest-Egg Calculator Tool. While it may trigger a shock to your system when you see the numbers, it can help you get into gear to retire well.

This calculator is incredibly easy to use and only needs two pieces of information from you! All you need to do is enter the amount of money you would like annually in retirement and how many years until you expect to retire. After that, the calculator will compute the amount of money that you need to have saved and how different annual rates of return will change that number.

Below you can see a calculation that I ran for an “annual amount I want” of $75,000 if I hypothetically retire in 20 years:

As you use this calculator, keep a couple of things in mind:

  1. The calculator assumes that you will never touch the principal.
  2. The calculator assumes that you will give your nest-egg a “cost-of-living-raise” of 4% each year.
  3. This calculator adjusts the “annual amount your want” for an average annual inflation of 4%.

So, at 4% annual inflation, I will need $164,334 per year in 20 years to have the same purchasing power that $75,000 has today.

The bottom six rows tell you what you need to have in your nest-egg at different rates of annual growth. At 8% annual return, I would need $4,108,356 when I retire. That number drops significantly if I expect growth of 12% and I would only need $2,054,178 when I retire.

These numbers may seem astronomical and you might feel like you will never build a nest-egg of that size. But remember, the power of compound interest can work in your favor! By starting early and investing consistently, you can watch your nest-egg grow to numbers you may have only dreamed of.

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10 Things You Can Do With Extra Money to Improve Your Financial Situation

Whenever you obtain extra money, it is an opportunity to take your finances to another level. Instead of racing out to spend it frivolously, I encourage you to consider how you can put that money to use in a way that propels your financial situation forward.

  1. Pay off a debt  When you pay off a debt, it will instantly increase your monthly cash flow. This is something we call “monthly margin” around here at I Was Broke. Now I’m Not. Plus, what other financial decision is more rewarding than making a debt leave your life?
  2. Buy yourself out of a membership/subscription  Things like cell phone contracts, gym memberships, satellite tv subscriptions, etc. Many people keep an unwanted subscription around simply because they don’t have the money to buy out the few months ‘cancellation fee’ required to cease service. This allows you to gain monthly margin and makes an annoying expense begin to fade in your rear view mirror!
  3. Build savings  Increasing your financial reserves/cushion/margin – something we call “reserves margin” around here at I Was Broke. Now I’m Not. – is never a poor decision! This positions you to accommodate unexpected financial challenges or pursue an opportunity.
  4. Invest for retirement  $1,000 extra today will be worth $3,300 in 10 years, $10,893 in 20 years, $35,950 in 30 years and $118,648 in 40 years. Get #FiredUp!
  5. Invest for college  $100/month will be worth $8,167 in 5 years, $23,004 in 10 years, and $75,786 in 18 years. Excellent decision!
  6. Obtain more education/certifications  Knowledge is power and can equal a substantial increase in your income and your value to the business you conduct.
  7. Purchase a(nother) home  Real estate is one of the time-tested ways for people to build wealth. Plus it can produce additional income using a service like VRBO, Homeaway, or AirbNb
  8. Become a private investor  There are lots of ways to become a private investor. You could start a small business. Maybe acquiring a minority stake in a larger existing business is more your style. Angel investing has been very popular over the past decade. Hard money lending is another way to put your extra money to work. Perhaps being a silent partner in a franchise could be more suitable for you.
  9. Vacation  A great leader once shared this formula with me: Change of pace + Change of place = Change of perspective | I’ve found it to be true. There is something about “getting away from it all” that helps you achieve clarity on your next steps.
  10. Give it away  There’s something powerful about giving money away. One friend told me that he “gives because it keeps him from becoming greedy.” When I give money away, it makes me want to make better money decisions so I can give even more. It connects to the “perspective” part of the equation I shared in #9.

No matter what decision you make, choose to put the extra money to work for you. Your future self is depending on you!